Filing Taxes for Non-Residents or Expats

Introduction
Filing taxes for non-residents or expats is one of the most complex areas of Canadian tax law. When individuals leave Canada, live abroad, earn Canadian-source income or become residents of another tax jurisdiction, their obligations to the CRA and Revenu Québec change dramatically. Many people mistakenly believe that leaving Canada automatically ends their tax obligations, but the rules are far more nuanced. Filing taxes for non-residents or expats requires understanding residency status, departure tax rules, reporting obligations, non-resident withholding, and tax treaties. Whether someone is moving abroad for work, investing in Canadian rental property, receiving pensions or returning to Canada after years away, precise tax compliance is essential. This guide explains Canadian non-resident tax rules, expat obligations and filing requirements to help taxpayers avoid penalties, double taxation and unnecessary CRA scrutiny.

Legal and Regulatory Framework
Filing taxes for non-residents or expats is governed by the Income Tax Act and residency guidelines from both CRA and Revenu Québec. Canadian tax residency is based on residential ties, not immigration status. Major ties include a home, spouse or dependants in Canada, while secondary ties include bank accounts, health cards and memberships. When individuals leave Canada and sever ties, they may become non-residents for tax purposes and must file a departure return. This return reports deemed dispositions of worldwide assets, including investments, foreign shares and certain properties. Departure tax Canada rules apply when capital property is deemed sold at fair market value upon leaving Canada.

Once non-resident status begins, only Canadian-source income is taxable. This includes rental income, employment income earned in Canada, business income, certain pensions, RRSP/RRIF withdrawals, CPP/OAS, and investment income subject to non-resident withholding. Non-residents receiving passive income are typically taxed at 25 percent unless reduced by treaty. Québec residents have parallel provincial rules when severing residency. Filing taxes for non-residents or expats requires applying these frameworks with precision.

Key Court Decisions
Courts have issued significant rulings that shape filing taxes for non-residents or expats. Several cases address residency determination, confirming that factual connections—not personal intentions—define residency. Courts have ruled that maintaining a home, spouse or bank accounts in Canada may prevent non-resident status. Other cases confirm that non-resident withholding tax applies even if the taxpayer believes the income is exempt. Disputes over departure tax Canada often involve valuation of assets and timing of deemed dispositions. In high-profile cases, courts ruled that taxpayers must report all worldwide assets on departure even if gains occurred outside Canada. Québec courts also issued rulings verifying that retaining strong residential ties prevents provincial residency severance. These decisions demonstrate how important it is to properly manage non-resident filing status and Canadian non-resident tax rules.

Why CRA Targets This Issue
The CRA pays close attention to filing taxes for non-residents or expats because residency misclassification can lead to major tax loss. Many taxpayers incorrectly claim non-resident status while maintaining significant ties to Canada. Others fail to file departure returns, leaving deemed dispositions unreported. CRA monitoring systems identify individuals who keep Canadian credit cards, drivers’ licences or health insurance after leaving the country. Pension payments, rental income, and investment accounts are also reviewed for proper withholding. The CRA often audits non-resident rental filings to ensure income is reported correctly under section 216 returns. Because Canadian non-resident tax rules involve complex international reporting and withholding requirements, the CRA ensures strict compliance.

Mackisen Strategy
Mackisen CPA offers a precise and comprehensive approach to filing taxes for non-residents or expats. We start by determining factual residency using CRA guidelines and reviewing all ties to Canada. For departing residents, Mackisen prepares the departure return, calculates deemed dispositions, identifies exempt properties, manages foreign tax credits and ensures proper valuation.

For non-residents with Canadian-source income, we prepare all required returns including section 216 rental returns, section 217 pension returns and T1 non-resident filings. We also ensure correct withholding rates are applied under applicable tax treaties. Mackisen assists clients with RRSP/RRIF withdrawals, pension planning, rental income structuring and compliance with Quebec residency requirements. For returning residents or expats relocating to Canada, we analyze residency re-entry rules, foreign reporting obligations and income recognition issues. Our strategy ensures full compliance with CRA non-resident obligations and minimizes double taxation.

Real Client Experience
Many clients arrive at Mackisen overwhelmed by filing taxes for non-residents or expats. One individual moved to Dubai and mistakenly continued using their Canadian credit card and driver’s licence, causing the CRA to question residency status. Mackisen corrected ties, filed the departure return and resolved the issue. Another client had rental property in Montréal but never filed a section 216 return. Revenu Québec issued a review letter, and Mackisen reconstructed rental statements, filed multiple years and avoided penalties.

A retiree living in France received Canadian pension income but was being taxed at 25 percent. After analyzing the Canada–France tax treaty, we reduced withholding to 15 percent. Another taxpayer returned to Canada after several years abroad and had foreign investments requiring specialized reporting. Mackisen completed voluntary disclosures and ensured compliance with both federal and Québec rules. These examples illustrate how critical it is to understand filing taxes for non-residents or expats.

Common Questions
Taxpayers frequently ask how residency is determined. The CRA evaluates residential ties, time spent in Canada and factual circumstances. Many ask whether they must file a departure return. Anyone leaving Canada permanently and severing ties must file one. Others ask whether rental income must be reported in Canada by a non-resident. Yes, rental income is taxable and can be filed under section 216 for lower tax rates.

Many expats ask whether CPP and OAS are taxable abroad. It depends on tax treaties. Québec residents often ask whether they must file separate provincial departure documents. Québec requires its own process. Understanding these common questions is essential for correctly filing taxes for non-residents or expats.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency and protection from audit risk. When filing taxes for non-residents or expats, Mackisen provides residency analysis, departure tax calculations, cross-border planning and full compliance support to protect clients from costly errors and CRA complications.